Money – Red Door Sentinel

Getting Ready for Taxes

The best advice I received when asking about filing taxes was to treat being an author like a business. This way you can record it as a business (and not just hobby income) on your taxes.

If you keep track of these things starting right now, it will be much easier to do your taxes. You could create a Living Document that contains the following:

Dates and times spent writing, editing, formatting, and anything else that has to do with your book
Every single expense (paper, ink, web site, proof copies, reference books, electronics that are only used for the book, etc.) – keep receipts
Editor, Formatter, Cover Designer fees
Mileage (date & time) for speaking engagements, as a vendor, or author events
If you use one room in your house to work on your book (it can’t be used for anything else), then this room can be calculated into a deduction
Number of books you sell personally (I keep a box in my car)
Income of books sold personally
For books sold online – online retailers have number of books sold and royalty information

See this post about Filing Taxes for more information.

Filing Taxes

These are just some basic guidelines.

State Sales Tax

You only need to pay on the royalties that you receive. You will get a 1099-Misc from Amazon (or where ever your books are sold). Use this to file with your state. If you buy books and sell them personally, you paid sales tax when you bought them.

State Income Tax

If your state has an income tax, you will need to report your 1099-Misc and the sales that you made in person.

Federal Income Tax

You will need to include the 1099-Misc and the sales you made in person.

If you consider being an author a business then you will need to fill out either a Schedule C (under $400 profit) or Schedule SE (more than $400 profit). This requires that your business is filed with your state and that you keep track of all expenses related to being an author.

NOTE – I am not a CPA or tax professional. I also do not know your specific financial situation. If you are unsure about anything to do with your taxes, please consult a professional tax preparer.

Money Matters

You may have begun to write… or not. But you know there’s a book in your future. These are just a few quick and dirty things to do. If you end up with a book in hand, you’ll be happy these things were done. If that book never materializes, there is no harm done.

Open a savings account that is only for your book. Doesn’t need to be a business account, just a plain savings account. Put any money that you get toward writing (donations, sales, etc.) into this account.

Keep track of all income and expenses. I use MS Money – it’s easy to use and it’s free to download.

Get a state tax ID number. If you decide to self publish, then use your publishing company name. If you don’t self publish then use your author name. Do a search online for your state and “tax ID application” to find out how to do it online.